There has been a “significant” drop in the number of high street law firms offering personal injury (PI) services, while the market is concentrating among a few large firms, new research has found.
IRN Legal Services estimated that, as the market has consolidated, the largest 25 PI law firms take a combined market share of around 30%, making it “the most heavily concentrated sector in consumer law”.
It continued: “Market consolidation is likely to continue especially following reductions in workload during the coronavirus crisis and some firms struggling to cover costs, and the new small claims limit reforms.”
While many smaller firms were still active in PI, IRN said the last 18 months have seen the number of high street general practices offering PI advice “drop significantly”. It estimated that around 2,600 law firms in England and Wales handled PI and clinical negligence work.
The Personal Injury Market 2022 report estimated that the market was worth £4bn in 2021, a marginal rise of 1.8% on 2020.
“This revenue increase also hides some differences across the sector: some of the larger volume players have achieved better revenue growth than the sector total along with some specialist PI and clinical negligence firms, but many mid-sized PI firms, and even some of the larger firms, have seen little growth and even revenue decreases.”
The rush to move into higher-value claims, following implementation of the whiplash reforms in May 2021, meant that claim numbers in such areas were likely to increase in the next few years.
But so would competition “and in 12 to 18 months’ time we could see more exits from the sector as some firms fail to generate enough higher-value claims to make their business sustainable”, IRN predicted.
Further, those firms staying for now in the low-value claims market, and developing IT solutions to work with the Official Injury Claim portal, “are likely to review this strategy in 12 to 18 months’ time when some decisions could be reversed”.
Official statistics showed how the number of claims has reduced in the last two years, with clinical negligence and public liability cases the only two categories where cases actually increased.
“There should be improved market growth in 2022 and over the next few years. although annual market value percentage increases are forecast to stay at low single digit levels.
“Many PI firms will have to deal with more market changes including the spread of fixed fees to more claims categories, and the likely introduction of mandatory mediation for some PI cases.”
IRN Legal Reports is a standalone market intelligence company which was spun out of IRN Research earlier this year.